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1. A companys sales and production levels are the same. The amount of income presented on a contribution margin format income statement

A. will always be the same as that shown on a traditional GAAP income statement.

B. will always be less than that shown on a traditional GAAP income statement.

C. will not differ from that shown on a traditional GAAP income statement regardless of the level of production and sales.

D. will always be greater than that shown on a traditional GAAP income statement.

2. There is an important relation between contribution margin and profit. Which of the following statements is not true?

A. As the number of units sold decreases, total contribution margin decreases, but fixed costs remain the same.

B. As the number of units sold falls, profit increases by the additional contribution margin per unit.

C. As the number of units sold rises, profit increases by the additional contribution margin per unit.

D. As the number of units sold increases, total contribution margin increases, but fixed costs remain the same.

3.The purpose of financial statements contained in annual reports is to

A. provide information to external users for decision making.

B. aid external financial users in analyzing product costs for the companys segments and perform short-term planning.

C. communicate a companys strategic direction and controlling activities to external users.

D. aid in monitoring day-to-day decisions of operations to ensure the companys strategy is followed.

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